Chevron comfy at 1400 Smith tower

By XXXX XXXXX, HOUSTON CHRONICLE

Published 12:01 am, Monday, July 4, 2011

Photo: Carlos Antonio Rios, Staff

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This skyscraper at 1400 Smith in downtown Houston was original built for Enron, but it was eventually bought by Chevron after Enron's collapse. While it might be as modern as some other buildings on this list, its circular walkway offers its own creative touch.

This skyscraper at 1400 Smith in downtown Houston was original built for Enron, but it was eventually bought by Chevron after Enron's collapse. While it might be as modern as some other buildings on this list,

Chevron Corp.'s recently closed purchase of 1400 Smith represents the biggest in a string of deals where tenants have turned into owners of Houston buildings.

In the last 18 months, eight large transactions have occurred or are in the works where buyers occupy or intend to occupy the buildings, including six this year alone, according to commercial real estate firm HFF. The eight deals total more than 2.5 million square feet representing more than $460 million in value.

"I've never seen this kind of activity," said Dan Miller, a senior managing director with HFF who has been in the real estate business for about 30 years. "Six during the first six months of 2011? That's pretty stout."

HFF advised Brookfield Office Properties on the sale of the 1.3-million-square-foot tower to Chevron, which had been the building's sole tenant since 2006. The building traded for $340 million. Miller, along with Jeff Hollinden, led the HFF team that advised Brookfield on the transaction.

Most of the recent deals have been driven by companies that want to control their own space, security and cleaning services, and to gain room for expansion, Miller said. Even more deals could be spurred by pending changes in accounting rules that could require a tenant to expense its entire lease obligation at once rather than over time.

Other transactions that have closed this year: Fugro Properties, which purchased Southwest Center at 6671 Southwest Freeway; Manhattan Life, which purchased 10777 Northwest Freeway; and HostGator.com, which bought 2550 North Loop West. Last year, Enterprise Products purchased 9420 West Sam Houston Parkway, and Emerson Electric bought a building at 6005 Rogerdale. Two other deals are pending.

Fugro plans to expand into three empty floors of the eight-story Southwest Center and will maintain the existing tenants, said Bob Gulley, a senior vice president with Moody Rambin Interests who represented Fugro. The building is next door to one the company already owns at 6100 Hillcroft.

Buying is not yet the norm, Gulley pointed out. While many of his clients consider buying, more often than not they end up leasing because it allows more flexibility for expansion or contraction, and there are a lot of costs associated with owning.

Exxon Mobil Corp., one of Houston's biggest corporate tenants, is shedding much of its leased space around town to consolidate to the campus it is developing near Interstate 45 and the Hardy Toll Road.

"They're moving out of buildings where they are a tenant to control their own destiny and to create their own environment south of The Woodlands," Miller said. "That's the mother of all user transactions."